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September 14, 2020

Market’s Difficulty Discounting Political Events

Market’s Difficulty Discounting Political Events

Why do so many people get caught up in the frenzy of a bull market? They define their reality first and see the market through that filter. Seeing the market’s reality has no predisposed definitions. To give a definition to the market one needs to put it into a numbers-based, price-based,  contextual model first. Only then can it have meaning. That way we are all dealing with the same facts. But that is tough to do with so much “off the cuff” content vulgarizing the social media.

Now that that same premise into today’s pollical area. The media loves to speculate about who is best for the markets, the Dems or the GOP, and what candidate in an election year is best for the market.

 

But today its more than that, the argument is that capitalism does best in a democracy, and it is our political system that is on the ballot this November. This brings me to the radical fact that my party of Reagan has been taken over by a fear-mongering authoritarian feeding off the paranoid thinking of a fragment of the population in a second attempt of manipulating the antiquated Electoral College system to his favor, or worse.

It does not matter who is elected in the fall, the market is setting up for a back to the normal bear market with interest rates leading the way, as they get back to normal. It does not matter who wins because there will be a crisis, a constitutional crisis going into the election and after. Why? because the election is rigged according to the White House and the Dems are concerned about the misinformation being propagated by offshore enemies of the USA. The election will not end quietly.

So, if your job is dependent on the bull market, I understand, and you should be concerned that not telling your clients to cash up, take profits, or hedge, is on you; and it’s not going to end nicely.

A segment of Market Map 2018 dated January 18, 2018

Don’t Forget About the Steve Bannon Indictment

Click here to view original web page at Don’t Forget About the Steve Bannon Indictment

The sheer number of Donald Trump’s cronies indicted, convicted, or still under investigation partially explains why this summer’s fraud and money laundering indictment of Stephen K. Bannon, Trump’s 2016 campaign manager and White House Chief Strategist, didn’t get the attention it deserved. Bannon is, of course, only the latest member of Trump’s inner circle to face criminal charges – a group that includes Paul Manafort who Bannon replaced at the campaign; Manafort’s Deputy, Rick Gates; National Security Advisor Michael Flynn; Trump’s personal lawyer Michael Cohen; Roger Stone, the Republican trickster.

Trump Is Corrupting the Entire Federal Government to Help His Reelection

Click here to view original web page at Trump Is Corrupting the Entire Federal Government to Help His Reelection

As we approach the November election, it has become clear that what we will see and hear from Donald Trump will become increasingly deranged. That was demonstrated during the first installment of his interview with Laura Ingraham when he peddled a known conspiracy theory.

The President claims people in the dark shadows who control the streets are really controlling Biden. He goes on to talk about a plane full of people wearing black uniforms but then says he can’t reveal anymore because it’s under investigation pic.twitter.com/AAk5GX0eWu

 

Senate Panel Releases Final Report On Russian Interference In 2016, Says Manafort Posed “Grave Counterintelligence Threat”

Click here to view original web page at Senate Panel Releases Final Report On Russian Interference In 2016, Says Manafort Posed “Grave Counterintelligence Threat”

The Senate Intelligence Committee has released a 966 page final report on Russian election interference in the 2016 presidential election, and outlines “Counterintelligence Threats and Vulnerabilities” during the race.

The panel interviewed over 200 witnesses and reviewed over 1 million pages of documents, according to The Hillfinding that while Russia made efforts to interfere in the election through disinformation and cyber campaigns, there was insufficient evidence that the Trump campaign ‘colluded’ with the Kremlin, as we were promised was the case by Rep. Adam Schiff (D-CA) and the MSM over the course of several years.

Contrary Thinking Starts Here

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice, at any time.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

 

 

September 10, 2020

Recap of major markets

Today 9/3/2020 the markets are flashing “DANGER” and no one is paying attention, NO ONE. Today 9/10/20 the majority continue to find a rationalization for more bull market.
Recap of major markets, click to enlarge charts

Bonds:  Like the bitcoin, gold, and silver panic buying high, the bonds were the first to make their FOMO peak back in March after seven months of emotional or poor buying, which was pointed out at the time. The expectation after such an event is nine out of ten for a sideways choppy range, that works off that condition setting up the next cycle.  As a rule, this kind of irrational buying is easy to flip. so after a period of distribution investors should expect these accesses to be corrected back to where they began.  That level runs from 144 – to 152, which takes the market below the end of the Elliott Wave (4), a bearish sign.

If we take the Fed chairman at his word, the real economy is his focus vis-a-vis 2% plus inflation and improving employment. Why? Because full employment is no longer an inflationary concern. The stock market is no longer their focus the real economy is their objective.

Use the breakdown levels to entry bear strategies or add to the existing short positions. I-T trends are pointing lower, tidal forces cycles are pointing lower and the background supports an I-T dynamic trend. So a break below 173 and the neckline should get carry over.

Euro Dollar:  Since its major bull market peak in 2008, the downtrend is a new secular bear market, that is being corrected today. The dollar bashers are retail and they are out in numbers gaining confidence in the counter-trend, the first leg of which has run its course.

US Buck: Began a new secular – very long term – bull market in 2011. The recent correction is counter-trend, which found support in both I-T and L-T support on a mini panic washout and extremely high bearish sentiment. Even the analyst that see the low are backing off the bullish outlook for the buck as it may impact negatively their bullish outlook for stocks.

Crude Oil is breaking out of its bearish wedge. I do not think I heard one content provider say that the wedge was anything but a continuation pattern bound to resolve itself to the upside. While longer turn Contrary thinker is bullish on “inflation” in the short to intermediate-term the rally in Crude appears counter-trend and the rally in the commodity indices looks like the first leg up of a new bull market.

While Crude is a main component of the commodity indices, I have real doubts that it will be a leader, as carbon fuels are dead leading to the bridge fuels like NatGas, Solar, and Wind.

Gold The long term outlook remains unclear but the ner term action should clarify that. The following chart is being used for that and for a short term quick profit opportunity short the market via a trend-following moving average system. Ironically, if the market breaks lower, the long term outlook becomes more bullish. But more on that later.

What is clear here is how the horizontal trading range is being picked up by TEM with the TE#2 signal that is in effect for eight days. This trading range is about to break, and CT is looking for a break to 1760.00. Even if the S-T is bullish, the near term has one last pullback to mid-range to set that up.

The intraday chart highlights how Contrary Thinker implements a strategy, refer to the annotations in the chart.

 

Historical Action

For whatever reason, this chart was used by a content provider to prove the public was trigger happy to jump into the bear (inverse) ETFs to use as his “contrary opinion” proof that a top can not be in place. The fact is that institutional types and capital managers use ETFs and ETNs that includes major banks, hence the billions of dollars and high daily volume. This is just not the bastion of the “small investor.” I don’t think the mom and pop type investor or even the guru want to be on Twitter have a clue what they are.  The point is the volume spiked going into the “shortest bear market” of all time – as the media liked to call it.

Today you can add my clientele to the current spike.

In the previous report where I pointed out the dramatic and bearish reversal by the Fang stocks plus five. A signal that is rare and bearish when 52-week highs are immediately followed by a 5% plus decline. A pal of ours on CNBC shared the following chart where he highlights the same occurrence by the Nasdaq 100 itself, a bearish signal.

 

Public point of view for contrary thinking. Based on the old fashion “odd lot traders” or the pink sheet traders that play penny stocks. When you see a surge of interest is slicing shares and long out of the money call option buying, the bullish frenzy is high, and time to raise cash and look for bearish opportunities.

The above chart speaks for itself. However, the next chart reflects how extreme the amount of time value is being spent buying low delta call options. WOW.

Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out. We apologize if you find you are not able to access the group or blog, consider being a Contrary Thinker 

 

Great and Many Thanks,

Jack F. Cahn, CMT

Contrary Thinker since 1989,
Copyright 1989-2020

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA
92264 USA. 760-459-4681 OR

25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice. My indicators and strategies can be withdrawn for private use without notice, at any time.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

 

 

September 8, 2020

Crude Oil Tracing out a Bearish Wedge

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September 4, 2020

MarketMap 2020 Issue #15

“It’s like déjà vu all over again.”

“Bears need love too”

It is worth repeating part of my comment regarding the reversal from the highs on 9/2/20 that “Doing the math, counting forward ten days was yesterday the 2nd. With a potential high pivot threatening, the bulls will attack long volatility futures that are breaking out as they go back to the mean reversion selling of the volatility complex. Hence the key for bears is the ability to hold the break.

I also said in this LinkedIn group space that “Markets do not crash from a major peak.” In other words, a long bar day declines of 4 or 5% off a high is more typical of a bull market shake-out vs the beginning of a new bear trend.”

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September 3, 2020

Volatility Reports Primary Markets 9/3/20

Sunday, February 23, 2020 Volatility Report said:  our aggressive short scalping systems are engaged for the Russell and the Crude Oil; and the group is status on Monday for the long-only the VX futures system and short-only  Nasdaq futures.
Today 9/3/2020 the markets are flashing “DANGER” and no one is paying attention, NO ONE.
Recap of major markets, click to enlarge charts

Bonds:  If we take the Fed chairman at his word, the real economy is his focus vis-a-vis 2% plus inflation and improving employment. Why? Because full employment is no longer an inflationary concern.

If true, they will not be coming to the aid of the stock market if and when it hits the skids. Rather they want to support increased inflation and full employment.  And, the credit markets will lead the Fed back to normal.

This is publically available information and should not be considered a black swan.

The interest rate volatility index has provided a breakout and a new uptrend in the implied anxiety index. The trend-following systems on bond volatility remain on a buy signal. Contrary Thinker’s position is a secular low that has been reached by interest rates and a long term return to normalcy.  Junk Bonds wedging out a peak.

 

Euro Dollar:  Since its major bull market peak in 2008, the downtrend is a new secular bear market, that is being corrected today. The dollar bashers are out in numbers gaining confidence in the counter-trend, the first leg of which has run its course. From a trading point of view, the risk is from 1.18 to 1.13 at a minimum, whereas a test of the low or an undercut low is also possible.

The long term chart seen here reveals the market hitting resistance at our fixed annual L-T zones and just under a Fibonacci 23.6% retracement of the secular bear.

The chart is the daily Euro shows a wedging out of a top; and with the underlying support of our volatility model, a TE#2, a trend should break in the near term.  The same model when applied to the Euros implied fear index also reveals a TE#2, which supports a breakout when it takes out its S-T zones or the Smoothed Bollinger Bands (not shown).

Bottom line we are Short Term to Intermediate-term bearish on the Euro. Contrary Thinker is expecting to go back short via the bearish EUO ETF and short the futures upon confirming signals from its systems and indicators.

US Buck: Began a new secular – very long term – bull market in 2011. The recent correction is counter-trend, which found support in both I-T and L-T support on a mini panic washout and extremely high bearish sentiment. Even the analyst that see the low are backing off the bullish outlook for the buck as it may impact negatively their bullish outlook for stocks.

Contrary Thinker is expecting to go back long the UUP and long the futures upon confirming signals from its systems and indicators.

Crude Oil is breaking out of its bearish wedge. I do not think I heard one content provider say that the wedge was anything but a continuation pattern bound to resolve itself to the upside. While longer turn Contrary thinker is bullish on “inflation” in the short to intermediate-term the rally in Crude appears counter-trend and the rally in the commodity indices looks like the first leg up of a new bull market.

The flat trading range bear market correction of 2019 will be alternated for now by something more complex, based on the rule of an alternation. An irregular flat would call off an undercut low by 1.236 times the most recent advance.  If it is a triangle, traders would see support come in at a 62% retracement of the counter-trend or $21. In either case, the decline should be a quick A-B-C.

The featured charts on Crude is all about the market context, its market-based condition. Implied volatility measured by our %BB (for Bollinger Bands) oscillator dictates how fear or concern about market prices being too high was non-existent for a prolonged period. This sold-out fear is now being reversed with a move by %BB above recent highs giving the appearance of a new trend. The Chart window on the right is the data itself pushing the upper limits of the smooth Bollinger Bands, breakout pending.

Tidal cycles are pointing lower for Crude and the weekly and daily bars both support breakdowns or trend signals to get carry over with a Technical Event #2 (charts not shown).

The Crude is worthy of an aggressive short strategy and sometime today or Friday the FastEd trend following scalper will be engaged.  Two big topics here to be clear, crystal clear. One this is new school trading where we use a macro filter to tell us when to buy (status on) the strategy and when to sell (status off ) the strategy.  Two the macro filter has nothing to do with the trailing P&L, NOTHING. Why you may ask?  Because the market does not care about my P&L,  and what Contrary Thinker looks at is a price based – not a money-based – model, a governor if you will, to make the strategy into a comprehensive system.

…Market Map 2020 to follow

 

Copyright 1989-2020
Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 8006183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.
— Pricing is subject to change without notice.  My indicators and strategies can be withdrawn for private use without notice, at any time.
— Contrary Thinker does not refund policy; all sales are the finale.
Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options.

 

 

 

September 2, 2020

Volatility Reports 09/02/20 Stock Market

“Best first day of September for the S&P +.75% since 2010.”

“The S&P 500 was up 7% last month. Here’s what it did the next month the past 15 times it was up at least 7%: You might notice a pattern. 5.0% 5.9% (3.1%) 0.5% 0.8% 5.7% 5.1% 9.4% 5.3% 3.4% 3.7% (0.5%) 0.1% 3.0% 4.5% for an Avg 3.2%” 

Does the above type of handicapping work? I doubt it.
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Sentiment among financial professionals propagated in the public sphere is predominantly bullish, as the above headlines. I have compiled over four weeks the content from the Twitter space provided by a sponsored compendium of TradingView. To date, 99% of all stock market posts are bullish in the face of the bulls proclaiming the market is climbing a “wall of worry,” Gives me a mind cramp.

Well, actions speak louder, as seen in the next two charts. Goldman’s chart of short interest is the lowest going back over 15 years, reflecting an aversion to the “short and hold” strategy. On that note, this is a glaring mistake in the imagination of bulls, that they sell short and hold, in the same way, they buy and hold. Profitable bears are good at market timing; its evident that over the very long term, markets go up.

But the point here is the retail trader at Goldman is a friend to short, which from a Contrary Thinker point of view is bearish.

 

To go hand in hand with the above sentiment measure is the “options speculation index, aka a put/call ratio is exceptionally bearish. It has not seen this amount of speculative history since the dot.com bubble burst two decades ago. That length of time is about right for letting people forget who was there and enough time to bring in a new crop of entry-level investors. This is one of the key leading indicators of a significant peak just not according to me but part of the list of seven major top factors by Ray Dalio.

My featured chart seen here is the cash S&P, showing the proper EWT wave count. A bar chart structure that explains the “V” shaped low and high rate of change advance, which fits the action post triangle. This advance has been making headlines as being the fastest recovery.

For example, a big firm pro thinks the market was parallel to the low in 2009; he says, “Check this out: As of last week, 83% of #stocks in the #SPX were above their 50-day moving average. That isn’t a bad number, and it’s one that has been fairly consistent in recent weeks. The level of participation is consistent with the 2009 recovery roadmap.”

Contrary Thinker does not see the low at point [4] being the same as 2009, in that this is not the beginning of a new secular bull market.

What the chart does show are one of our “in house” indicators that is accurate as a leading warning signal of a significant perk “coming soon” As we made clear in the last Volatility Reports” on the stock indices, the market is working on borrowed time, pun intended.

It goes without saying that no systems, no overreaching investing/trading model is perfect. However, the Technical Event Matrix rarely gives panic signals – TE#1 – on the monthly bar.  This was pointed out the last issue. I wanted to reinforce that the advance in August in the Dow, S&P,  and Nasdaq was panic buying, otherwise referred to as irrational.  As pointed out also is a panic high is nine times out of ten if not better, is climatic; and will lead to a reversal.  The small-cap did not play along. 

What else is interesting is the three standard deviation move by the Nasdaq – lead by the FANG stocks – making it the most overbought in 11 years on the futures, and 15 years on the composite.  Such an event suggests at least a reversion to the mean.

MarketMap – 2020 with the current set up time windows for change, in publication, shortly.

Back Story

According To Nomura The “Largest Pain Trade In The World” Will Hit In September

Click here to view the original web page at According To Nomura The “Largest Pain Trade In The World” Will Hit In September

If one looks at sto(n)ks, it appears that nothing can dent their relentless ascent as virtually everyone is now convinced that central banks will never again allow even a modest correction and so even the slightest dip is bought with reckless abandon… or rather a handful of stonks are bought now that the S&P500 is the S&P5.

Volatility Reports 09/02/20 Stock Market

Yet while everyone is just as certain that yields will only sink lower, McElligott counters that precisely because of that, a spike in yields would be “the largest pain-trade in the world”, one which sends shockwaves across both equities (Value vs Growth) rotation and Commodities (send gold tumbling). As the Nomura quant explains, a spike in yields would trigger counter-moves across the asset spectrum:

  1. Gold’s recently “grabby” vertical move as everybody owns it now (real yields higher would mean gold lower), with any potential bond selloff also likely to:
  2. trigger a reversal in crowded legacy US Eq “Growth” factor over “Value” positioning as well (particularly into any bear-steepening, which sees “Value” benefit to the pain of “Momentum”)So if not August, then when? Well, as the Nomura quant answers, “the key window then for a UST bond selloff becomes September (and Q4 thereafter)” because that’s when traders and bankers come back from vacation, and the result is a flood of new bond issuance which is “likely to tilt the supply/demand dynamic finally in favor of tactical “bears” when traders return following the Labor Day holiday.”“IG issuance this month is running at 30% of June’s pace, and August is traditionally a slow month for issuance given vacations, so I wouldn’t be surprised to see corporate issuance ramp back-up in a meaningful way come September. This issuance in conjunction with the ongoing steady deluge of government supply could prove to be the catalyst for a revisit to the upper-band of the recent yield range.”

 

Visitors at the “Volatility Reports” Group in LinkedIn need to opt-in as a subscriber before their free look runs out. 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-6183820 or 25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice.  My indicators and strategies can be withdrawn for private use without notice, at any time.

— Contrary Thinker does not refund policy; all sales are the finale.

— Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

August 29, 2020

Volatility Reports 08/31/20 Stock Market

Fed’s Bullard says the recession is over but rates will ‘stay low for a long time’

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Short volatility investors, fully invested asset allocation bulls, would find this news from the Fed over the weekend comforting. Bullard also believes reports on the economy will be “one of the best quarters ever for economic growth in the U.S.” The market’s optimism is in gear with his thinking.

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August 25, 2020

Volatility Reports Stock Market 08/25/20

The foresight from the 2016 election, the crashes (2) in 2018 (aka volatility regime change) have implications for today’s market, the election in November 2020 and the 2021 markets

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Literally every advisor/content provider being shared and re-broadcasted in the various forms of media are focus on reporting the new highs, the continuation of the uptrend, and the record-breaking market experience from March 23, low.  This background sentiment has been clear for the last 4 weeks.

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August 19, 2020

Volatility Report USD August 20, 2020

Expected Currency Wars. Here are the whys and what for with some ideas on how to play it.

It’s an old story that everybody with even the smallest amount of experience knows that the monetary policy helps inflate an asset bubble, rather than constrain one. Have a look at the history back in the 1920s and again in 2008. Today central banks around the world are reluctant to fight inflation when growth investments provide great returns.

The problem is that such periods are typically interpreted to be productivity booms, which they are not. Rather they only provide a positive feedback loop for investors to leverage up and buy more investment assets.

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August 16, 2020

Volatility Reports 08/17/20 Bond Market

Debt ratios had been looking bad before the pandemic, and today it’s worse. Inflation, which has been a nonstarter for decades may be on the verge of a comeback in a world awash with fiat currencies.

So the credit markets are starting to appear spooked. Volatility Reports sees a number of cracks in the bonds across all ratings. Here is a more complete picture.
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